Affiliation:
1. Tunis High Institute of Business, Manouba University, Tunisia
2. Applied College, Taibah University, Saudi Arabia
Abstract
This chapter investigates the safe haven property and hedge of gold especially during GFC and COVID-19 for G7 stock markets by using DCC-GARCH and wavelet coherence analysis. The findings reveal that the dynamic conditional correlation between gold and each G7 stock market decreased significantly during extreme market conditions, especially during GFC and COVID-19. The results show that gold served as a strong safe haven asset for all G7 stock markets except Nikkei225 during GFC. However, gold has maintained this traditional role as a safe haven only for CAC40, S&PTSX, FTSE/MIB, and FTSE100 during the COVID-19 pandemic. The optimal portfolio weights of gold in each G7 stock market significantly increased during GFG and COVID-19 pandemic, meaning that investors should invest more in the gold as a ‘flight-to-safety asset' during market turmoil. The decomposition of the coherence between gold and each G7 stock market into three investment horizons demonstrates a weak correlation in both the short term and the long term for the normal and extreme conditions market.